How to save and invest when you have student loans

Navigating dental school is challenging. Between the long hours in the classroom and training, there’s little time to think about your finances. However, now is the best time to start saving. Whether your goal is to pay off debt, increase your savings or start investing for the future, there’s no time like the present to get started.

If you’re one of the millions of Americans with student loans, it might be hard to know where to begin. How do you find extra money after making your student loan payment each month? Should you wait until your loans are paid off to start investing for retirement? If not, how much money should you allocate to each goal? While everyone’s situation is unique, there are a few rules of thumb that can help you reach your financial goals no matter how much student loan debt you have. Here are six tips that can help you build a solid financial base.

1. Start small. If you’re like most people with student loans, you don’t have a lot of extra money to invest or save at the end of each month. But don’t let that stop you from trying. A small, consistent amount can make a big difference over time (and is far better than nothing at all).

The key is to focus on one thing at a time and just do what you can when you can. For example, if you don’t yet have an emergency fund (more about that in No. 3), start by putting whatever you can afford into a high-yield savings account each month. Many banks offer automatic transfers or savings programs that will help you continuously drip money into the account without feeling like it’s a huge economic loss. And if you get a windfall, like birthday money or a bonus at work, put half of it in that account. Then, when your emergency fund is stocked, move on to the next goal.

2. Reduce high interest rate debt. If you have multiple sources of debt, pay off your high interest rate loans first. For example, you might pay the minimum on your low interest rate subsidized loans but tackle your high rate unsubsidized, PLUS or private loans more aggressively. It’s also worth looking into refinancing these loans at a lower rate. The lower the interest rate on your loans, the faster you can pay them off — and the sooner you can start using that money for saving and investing instead.

And if you have any credit card debt, pay it off and keep it that way. Carrying a balance on a high interest credit card will only sabotage the rest of your financial strategy.

3. Give yourself a cushion. Financial experts recommend that you have three to six months of living expenses saved in an emergency fund in case your income suddenly disappears. This is crucial for student loan borrowers, since even one late or missed payment can have a material impact on your credit score. Make sure your emergency fund will allow you to pay all of your bills, including minimum payments on your student loans, for at least a few months until you’re back on your feet.

4. Invest. When it comes to retirement investing, time is one of the best tools in your arsenal. The sooner you start investing, the more time your portfolio has to grow through the magic of compound interest. But if you wait to get started until your student loans have been totally paid off, you’ll miss out on a lot of that time.

That said, you don’t want retirement investing to come at the expense of your overall financial health. For example, you may want to delay or minimize investment contributions until you’ve paid down your high interest rate debt and established an emergency fund. You can plan to increase contributions when you have only low interest rate student loans left on your plate.

5. Adjust as needed. Your financial situation may look different next year, so make sure to revisit your strategy every so often (quarterly is a good goal, but annually at a minimum). For example, a raise or a bonus may allow you to finally pay off one of your loans, top off your emergency savings or increase your retirement contributions. Before you spend that money on things you can’t even remember later, apply it to your financial strategy, and the long-term rewards will be great.

The American Student Dental Association has partnered with SoFi to bring members the opportunity to start investing with SoFi Wealth at SoFi.com/ASDA. Members and their families who open a wealth account through SoFi.com/ASDA are eligible to receive a $100 welcome bonus upon refinancing.

This content is sponsored and does not necessarily reflect the views of ASDA.